The European Securities and Markets Authority (ESMA) has recently raised concerns about Maximum Extractable Value (MEV) being used as a form of illegal market abuse in the context of the Markets in Crypto-Assets (MiCA) regulation. This development has been highlighted by Patrick Hansen, a well-known commentator on crypto regulations, who pointed out the significant implications this could have on the crypto industry.
Reporting Requirements for Regulated Businesses
Under the proposed standards, almost all regulated crypto businesses in the EU, such as exchanges and brokers, will be required to detect and report instances of MEV through suspicious transaction or order reports (STORs). The comprehensive ESMA STOR template alone spans six pages, indicating the detailed reporting procedures mandated for MEV detection. However, the manageability of reporting every single instance of MEV has been called into question by Hansen, given the complexity and frequency of such occurrences in the crypto market.
ESMA’s draft standards also suggest a collaborative approach to enforcement, urging authorities within and outside the EU to cooperate on sanctioning market abuse. This means that actors involved in MEV could potentially face investigations and enforcement actions not only from EU regulators but also from international authorities. This highlights the growing importance of global cooperation in addressing market manipulation in the crypto sector.
Patrick Hansen emphasized the crucial role of stakeholder participation in the consultation process for refining MiCA’s implementation. Feedback from those directly involved in MEV and other crypto activities is seen as essential for developing effective and practical regulatory measures. ESMA has set a deadline of June 25 for stakeholders to submit their feedback on the draft standards, indicating the importance of industry input in shaping the regulatory environment for crypto in the EU.
Once finalized, the standards related to MEV are expected to play a critical role in shaping the regulatory environment for crypto in the EU. This could potentially set a precedent for other jurisdictions looking to enhance market integrity and protect investors in the rapidly evolving crypto sector. The focus on addressing sophisticated forms of market manipulation reflects the EU’s commitment to staying ahead of regulatory challenges in this space.
